Banks to lower interest rates

ET BureauJun 29, 2009, 09.28pm IST

KOLKATA: Uco Bank said it will consider slashing deposit rates by up to a 100 basis points (bps) soon, even as public sector banks are lobbying hard with the finance minister for a postal savings rate cut as a precursor to lowering deposit rates. Allahabad Bank has already decided to cut its benchmark prime lending rate (BPLR) by 25 bps to 12% from July.

Uco Bank chairman and managing director SK Goel said here on Monday: "We are likely to cut deposit rates by 50-100 bps. A final decision to this end will be taken in the first week of July."

Mr Goel, who was speaking on the sidelines of a banking conclave organised by Ficci's eastern regional council, said the Kolkata-based bank's interest rate margins was under pressure at 1.95% for the quarter to June. The bank has kept its BPLR at 12.5% since March 2009.

"Banks need to reduce deposit rates before lowering lending rates. But as long as small savings rates with post offices continues to be at 8%, it would be difficult for banks to cut rates significantly. We've requested the finance minister to look into this aspect," Mr Goel mentioned in his address at the conclave.

Uco is expecting a 15-20% growth in profitability for the June quarter. "We are expecting higher profits based on improved treasury income, non-interest income and recovery of bad loans," Mr Goel said, adding that the bank recorded a treasury income of around Rs 105 crore, compared with Rs 60 crore in the corresponding quarter to June 2008. Its net profit for the period between April and June 2008 was Rs 133.44 crore.